S&OP, Demand Control,

and Quick Response

Forecasting
By Patrick Bower

E X E C U T I V E S U M M A R Y | There has been some discussion of late in IBF circles about Quick Response Forecasting
(QRF). In my attempt to understand the concept, I have read a number of articles only to find myself a bit confused by proponents
who discuss everything from Big Data, to point-of-sale data (POS), to “responsive” Supply Chains—each already having a place
and a role in Supply Chain Planning, but none of which are conceptually new. On its surface, QRF seems to be a demand planning
idea without particularly well-defined boundaries or purpose. After digesting the available literature, I think otherwise well-
meaning folks are trying to define a process that already exists inside the Sales and Operations Planning process (S&OP). It is
referred to as Demand Control (and sometimes SOE – Sales and Operations Execution) , and it is the transition point from more
strategic planning to execution planning within S&OP.

PAT R I C K B O W E R | Patrick is Senior Director, Global Supply Chain Planning & Customer Service at Combe
Incorporated, producer of high-quality personal care products. A valued and frequent writer and speaker on
Supply Chain subjects, he is a recognized demand planning and S&OP expert and a self-professed “S&OP geek.”
Prior to Combe, he served as the Practice Manager of Supply Chain Planning at a boutique Supply Chain consulting
firm, where his client list included Diageo, Bayer, Unilever, Glaxo Smith Kline, Pfizer, Foster Farms, Farley’s and
Sather, Cabot Industries, and American Girl. His experience also includes roles at Cadbury, Kraft Foods, Unisys, and
Snapple. In addition, he has worked for the Supply Chain software company, Numetrix, and was Vice President of
R&D at Atrion International. He was recognized four times by Supply and Demand Chain Executive magazine as a
“Pro to Know,” and Consumer Goods Technology magazine considered him one of their 2014 Visionaries. He is the
recipient of the inaugural IBF’s Excellence in Business Forecasting and Planning Award.

I
have been reading a few articles
on Quick Response Forecasting of
late, and I struggle to understand
why it is a “thing.” Most of what I
have read is confusing. Proponents of
the concept offer use cases that are
disconnected from either S&OP as a
governing process or demonstrate
a lack of understanding about
how distribution, inventory, and
manufacturing are planned day-to-
day. Try as I might, I usually find myself
shaking my head in frustration as I
read articles on the subject. As well
intended and knowledgeable as they
are, it seems the advocates for QRF
are trying to build a baseball field on
which to play basketball.

10 Copyright © 2018 Journal of Business Forecasting | All Rights Reserved | Summer 2018 | www.ibf.org
NEW DATA & NEW
DEMAND SIGNALS
ALLOW US TO REACT
FASTER
I think—and this is purely a guess—
that the notion of Quick Response
Forecasting is a reaction to the surge
in new and improved streams of de-
mand signals, courtesy of the rapidly
morphing digital landscape. We now
have the ability to see almost imme-
diately if a product is trending online,
which allows us to gauge consumer
sentiments and know what the Inter-
net buzz is on any given day. We also
have tools to better understand point-
of-sale data, and to better compre-
hend and process demand-shaping
events in both POS and shipment data.
We must be able to find some new use
for all these news tools, right? Well,
QRF seems to be an attempt to answer
to that question. By leveraging these
new-found data and toolsets, QRF
suggests the dynamic re-planning of
demand, and (I assume) the balance
of the supply chain around these new
data points. Since the word “quick” is
foremost in the very definition of QRF,
I presume it means that the forecast-
ing response process operates within
the confines of lead time and/or the
normal monthly S&OP cycle.
LITTLE-KNOWN PART
OF S&OP CALLED
DEMAND CONTROL
Instead of focusing too much on
the QRF concept, I think it makes
the most sense to address a seldom-
discussed element of S&OP known
as Demand Control. Demand Control
is not new, but it does not get the
Copyright © 2018 Journal of Business Forecasting | All Rights Reserved | Summer 2018 | www.ibf.org 11
mindshare that other elements of the
S&OP process receive—and yet, is the
process element that seems to solve
most of the problems that QRF aims to
solve. Demand Control exists squarely
between demand and supply, within
the execution phase of supply chain
planning. It is the sometimes daily,
and sometimes weekly, but always
within the S&OP cycle, dealing with
reconciliation of forecast overcon-
sumption, production, under/over-
delivery, inventory management, and
so on. It is most often considered to
be a supply planning function within
which the newest information about
demand or supply values is man-
aged between S&OP process cycles. I
suspect the reason Demand Control
is rarely talked about is because it is
thought to be Supply Chain execution
planning, and because it is an S&OP
muscle not formally exercised in the
form of a standalone meeting or with
a regular cadence. Demand Control
is more ad hoc, and reactive to short
term changes in supply and demand
than the other process elements.
Let me offer an example. Imagine
that a production line goes down.
Most line outages are unplanned
events and certainly a departure from
any S&OP plan. Upon learning of a
capacity loss, a supply planner might—
in short order—check inventory
levels, determine impacts, move to
another production line or facility,
redeploy raw and pack components,
arrange for expedited freight, and
trigger half a dozen other tasks to
ensure supply is uninterrupted. Once
a recovery plan of sorts is in place,
the planner informs the organization
of the recovery effort while keeping
the S&OP team informed as needed.
The supply planner will work with the
demand planner, finance, and sales to
monetize the impact on the forecast,
the top line, and the bottom line. The
supply planner is also likely to bring
the issue to the next Supply Review
Meeting, thereby closing the loop.
Every action, step, or communication
I’ve described falls under the auspices
of Demand Control. Demand Control,
in this example, responded to the
change in supply parameters in the
short term, and reworked the plan
accordingly.
Demand Control exists as an S&OP
element mainly because every step in
a supply chain has volatility that man-
ifests itself within the S&OP cycle. The
example of a production line going
down is very typical of this implied
uncertainty. Freight, production, and
demand can all over or under deliver,
be on time or be late, and yield losses
or misses. S&OP plans are developed
monthly and with a long-term view
to the future, while Demand Control
is the S&OP process equivalent of dai-
ly life in the trenches, with a figura-
tive fire hose slung over the planner’s
shoulder. Schedule adjustments, re-
deployment of assets and expedites
happen frequently in most organiza-
tions, and while this work is usually
outside the scope of senior leader-
ship, it represents the daily work of
most planners.
There are other important linkages
between Demand Control and the
monthly S&OP cycle. First (hopefully)
with the production line outage
example in mind, the potential for loss
of production was already anticipated
as part of a what-if scenario, and the
S&OP process already had well-defined
guideposts for appropriate reaction
in the event of this outage occurring.
Second, all decisions made within
Demand Control should align with the
customer, Supply Chain, or product
strategy. For example, when making
decisions about how to re-plan in the
event of an outage, you may choose not
to run a lower-margin commodity item
on the alternate production line, using
the capacity instead to fill demand for
the higher-margin or more strategic
items. Similarly, decisions might be
made around strategic customer/
item combinations when a product is
in short supply or in allocation mode.
And finally, the net impact of this
departure from the S&OP plan should
be assessed and discussed in future
S&OP meetings.
LOOKING FOR A
PROCESS TO REACT
SOLUTION FIT FOR
QUICKLY TO DEMAND
THE INSTAGRAM AGE
SPIKES ALREADY
EXISTS So, what happens in Demand
Control when demand suddenly
Certainly, being able to respond
quickly is a key feature of the QRF con-
cept—with a special focus on changes
in demand. In fact, demand sensing is
featured prominently in QRF discus-
sions and writings. Whether demand
sensing is traditional or aligned to
some spot surge in digital interest,
the underlying thinking is that the
faster we sense demand changes, the
faster we can put together a supply
response. Like QRF, Demand sensing
is very important to Demand Con-
trol, and thus might actually be one
of the crossover points with QRF. In
Demand Control, demand sensing is
recognized via numerous status re-
ports, offering insight about how the
current month’s forecast is tracking to
plan (for both POS and shipments). It
is not unusual to recognize an emerg-
ing oversell within the current month,
and then recast the short-to-medium-
term forecast and supply response to
an actual spike in demand. Certainly,
reworking a forecast based on new
inputs is helpful in understanding the
scope of short-term risk and thereby
12 Copyright © 2018 Journal of Business Forecasting | All Rights Reserved | Summer 2018 | www.ibf.org
the potential response, but it does lit-
tle to enable the response. The ability
to respond is really predicated on hav-
ing agile resources, with systems that
allow quick, dynamic re-planning and
deployment, and excellent commu-
nication and coordination. Demand
sensing is used in Demand Control to
enable a quick supply chain response,
but the actual re-forecasting in the
short term is just a small component
of the whole response.
spikes? One of the QRF scenarios I read
about had me imagining the impacts
of one of the Kardashians sporting a
new red lipstick. From the time the
first lipstick-laden paparazzi picture
hits social media, all the assorted
digital sensing tools start buzzing,
but none of these are offering a
true demand signal. They are mostly
indicating that something is up. The
traffic on Amazon might tip up a bit,
and the direct to consumer site might
see some additional activity. More
traditional demand signals such as
shipment and POS data are saying “This
is selling well!” and within days of the
first image, planners begin noticing
that inventory is being over-depleted
in the trade, and at some distribution
points. While Sales and Marketing are
ecstatic and sending e-mail blasts
heralding the success of their product
placement, supply planners on the
front lines are monitoring stock status
and forecast consumption reports that
alert them to issues. These planners
are likely to reach out to both Sales
and Marketing to verify that the POS
and shipment data is aligned with
the other demand signals, and to try
to get some idea of what a revised
short-term forecast should be. Then
they begin the process of building
inventory back to desired levels. They
may also check to see if there are
regional dynamics requiring existing
inventory to be redeployed to a
certain geography, or if there is a need
to reprioritize customer orders, giving
some key accounts preference over
others. In this example, all the sensing
is part of a Demand Control function,
as is the reaction: redeploying
inventory within the DC, firing up
extra production batches around
an estimated oversell, dynamically
deploying the next cases of inventory
coming off the production line to the
neediest distribution centers, and
working with the order management
team to prioritize customer accounts.
Whew! This is Demand Control.
I will admit, there were a couple of
finer points in the QRF articles that I
took issue with. One of the QRF pro-
ponents discussed a scaled down ver-
sion of an S&OP meeting, even calling
it “mini-S&OP” as part of the Supply
Chain response model. Demand Con-
trol already exists within S&OP, thus
ad hoc meetings can be assembled
at any time to meet a specific priority
need or issue. It is very common for
planners to call together some mem-
bers of the S&OP team—sales, supply,
demand—and convene a small group
meeting to solve an issue at hand.
However, most of the time the effort
involved is the narrowest of supply
and demand rebalancing, not a whole
process unto itself. And, generally
speaking, I am not a fan of naming
anything mini-S&OP as it only further
muddies the definition of S&OP.
Similarly, some quick-response
approaches suggest redefining S&OP
as a weekly process vs. a monthly
one, based on exactly these types of
CONCLUSION the daily and weekly processes lever-
aged in execution planning and tying
examples. When I read this, I always If I were to distill the lessons them back to S&OP is important.
feel as if the authors are missing a learned from my reading - I am pretty I love that people are looking to
bit of education relating to S&OP sure QRF is not a real thing. But many incorporate new technologies into
and I wonder if they fully aware of of the concepts mentioned in the QRF the S&OP process, and I applaud those
the day-to-day roles of supply chain literature strike a chord, such as de- with the courage to put a strawman
planners. In my experience, supply mand sensing, digital sensing, lever- concept such a QRF on the table.
planners are always engaged in some aging Big Data/Predictive Analytics, However, just because I have a car
quick-response planning/re-planning and building an agile supply-response capable of driving 150 miles an hour
work every hour, day, and week of organization. These all make sense to does not mean it is wise to do so. It is
the month between S&OP process me. But they are not really new and best to use that capability selectively
meetings. I suspect (trying to take should already be incorporated in all and in the right forum. My advice is
the best view of QRF) that maybe supply chains and S&OP processes that proponents of Quick Response
what proponents are really saying where feasible. Discussing mini-S&OP Forecasting should look inside the
is that they want to formalize the or some short-cycle version S&OP is existing S&OP model for the solution
Demand Control process into its own just bad practice and, to me, is con- they seek.
weekly meeting. If an organization ceptual roadkill. But understanding —Send Comments to: JBF@ibf.org
regularly experiences a lot of demand
and supply exceptions, the idea of a
weekly meeting makes sense. Many
companies already have different
versions of a weekly update meeting,
reviewing the status of what’s hot and
what’s not. In fact, most organizations
will assemble a core team to discuss
their supply and demand exceptions.
This is not really anything new.
Of course, some of the conversa-
tion around QRF aligns with sexy in-
novations like Predictive Analytics,
Artificial Intelligence and Big Data.
The underlying premise being that
our supply chains can be more re-
active to shifts in demand if we use
such tools to forecast, plan or re-plan
faster. All of these otherwise great
tools have a role in the existing S&OP
process and, if short-term insight or
planning is needed, also within De-
mand Control. While I can talk in de-
tail about future opportunities for
some of these emerging technolo-
gies, the simple message most rele-
vant to today’s businesses is to lever-
age all data and tools as appropriate
in either Demand Control or within
an S&OP process review meeting.

Copyright © 2018 Journal of Business Forecasting | All Rights Reserved | Summer 2018 | www.ibf.org 13
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